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IRS Files Answer to Prince Estate’s Tax Court Petition

NOV. 19, 2020

Estate of Prince R. Nelson v. Commissioner

DATED NOV. 19, 2020
DOCUMENT ATTRIBUTES

Estate of Prince R. Nelson v. Commissioner

ESTATE OF PRINCE R. NELSON, DECEASED,
COMERICA BANK & TRUST, N.A., EXECUTOR,
Petitioners,
v.
COMMISSIONER OF INTERNAL REVENUE,
Respondent

UNITED STATES TAX COURT

ANSWER

RESPONDENT, in answer to the petition filed in the above-entitled case, admits and denies as follows:

1. through 5. Admits.

6. Avers that respondent's answers to the subparagraphs of Paragraph 6 of the petition are as follows:

a. Admits respondent's determinations, but denies respondent erred as alleged. Further denies that petitioner established the fair market value of the subject properties with qualified independent appraisals,

i. through ix. Admits respondent's determinations, but denies respondent erred as alleged. Further denies that petitioner established the fair market value of the subject properties with qualified independent appraisals.

b. Admits respondent's determinations, but denies respondent erred as alleged.

i. Admits that respondent classified certain personal property that petitioner claims was owned by PPE and/or NPGR as being directly owned by the Decedent, but denies respondent erred as alleged.

ii. through iii. Admits respondent's determination, but denies respondent erred as alleged. Further denies that petitioner established the fair market value of the subject property with a qualified independent appraisal.

c. through g. Admits respondent's determinations, but denies respondent erred as alleged. Further denies that petitioner established the fair market value of the subject properties with qualified independent appraisals. Further denies all factual allegations for lack of sufficient knowledge or information.

h. through i. Admits respondent's determinations, but denies respondent erred as alleged.

7. Avers that respondent's answers to the subparagraphs of Paragraph 7 of the petition are as follows:

a. Admits.

b. Denies for lack of sufficient knowledge or information.

i. Avers that respondent's answers to the subparagraphs of Paragraph 7.b.i. of the petition are as follows:

(A) Admits.

(B) Denies for lack of sufficient knowledge or information.

(C) Admits that the Minnesota Department of Revenue obtained an appraisal which indicated that the fair market value of the Galpin Property was $15,750,000, but denies that respondent was working in conjunction with the Minnesota Department of Revenue or that respondent relied on the appraisal that was obtained by the Minnesota Department of Revenue. Denies the remainder of the allegations for lack of sufficient knowledge or information.

(D) Admits.

(E) Admits that the buyer in the Option Agreement exercised the option, but denies the remainder of the allegations for lack of sufficient knowledge or information.

(F) Neither admits nor denies as the allegations concerning the DOR Galpin Appraisal are legal conclusions, they relate to an inadmissible purported expert report, and because they are irrelevant as respondent did not rely on the DOR Galpin Appraisal as support for his determination. To the extent this subparagraph requires an answer, respondent denies for lack of sufficient knowledge or information.

ii. Admits that respondent has not yet obtained an independent appraisal of the subject properties, but denies the remainder of the allegations for lack of sufficient knowledge or information.

iii. Admits that respondent based the valuation of the subject properties on the price at which those properties were sold at after the Decedent's death, but denies that respondent erred as alleged. Further denies the remaining allegations for lack of sufficient knowledge or information.

iv. Denies for lack of sufficient knowledge or information.

c. Admits, but denies that the fair market value of the underlying assets of PPE were correctly determined by petitioner.

i. Avers that respondent's answers to the subparagraphs of Paragraph 7.c.i. of the petition are as follows:

(A) Admits that the subject property was not appraised by petitioner prior to the filing of the estate tax return, but denies the remainder of the allegations for lack of sufficient knowledge or information.

(B) Denies for lack of sufficient knowledge or information.

(C) Admits that the Minnesota Department of Revenue obtained an appraisal which determined that the fair market value of the Audubon Road property was $5,200,000, but denies that respondent was working in conjunction with the Minnesota Department of Revenue, that the determination was accurate, or that respondent adopted the conclusion in the MNDOR Audubon Appraisal. Denies the remainder of the allegations for lack of sufficient knowledge or information.

(D) Admits that respondent relied on the MNDOR Audubon Appraisal, in part, and that respondent determined that the fair market value should not be reduced by the purported cost of deferred maintenance, but denies respondent erred as alleged. Denies the remainder of the allegations for lack of sufficient knowledge or information.

(E) Denies for lack of sufficient knowledge or information.

(F) Denies for lack of sufficient knowledge or information.

ii. Admits.

(A) Denies.

(B) Admits, but denies that respondent's reliance on the purchase in the Option Agreement was improper.

(C) Admits that the PPE owned Galpin Property parcel was included in Phase II of the Option Agreement, but denies the remainder of the allegations for lack of sufficient knowledge or information.

iii. Admits that respondent adjusted the fair market value of the subject property based on the sale price of the subject property, but denies respondent erred as alleged. Further denies the remaining allegations for lack of sufficient knowledge or information.

iv. Admits that respondent adjusted the value of PPE's. 1% interest in NPGMP based on respondent's adjustment to the total fair market value of NPGMP, but denies respondent erred as alleged. Further denies the remaining allegations for lack of sufficient knowledge or information.

v. Admits that respondent adjusted the value of PPE to exclude all of the Decedent's personal property, but denies respondent erred as alleged. Further denies the remaining allegations for lack of sufficient knowledge or information.

d. Denies for lack of sufficient knowledge or information.

i. through ii. Denies.

e. Admits, but denies that the fair market values of the underlying assets of NPGR were correctly determined by petitioner.

i. Denies for lack of sufficient knowledge or information.

ii. Admits that respondent adjusted the value of NPGR's interest in the subject real estate based on the sales price of that property after the Decedent's death, but denies respondent erred as alleged. Further denies the remainder of the allegations for lack of sufficient knowledge or information.

iii. Admits that respondent adjusted the value of a receivable to its face value and that respondent made a whipsaw adjustment that increased the Decedent's net taxable gifts by $36,000, but denies respondent erred as alleged. Further denies the remainder of the allegations for lack of sufficient knowledge or information.

iv. Admits that respondent adjusted the value of NPGR to exclude all the Decedent's personal property, but denies respondent erred as alleged.

f. Admits, but denies that the fair market values of the underlying assets of NPGMP were correctly determined by petitioner.

i. Denies for lack of sufficient knowledge or information.

ii. Denies for lack of sufficient knowledge or information.

iii. Admits that the Estate reported that the fair market value of NPGMP was $21,06,896.48 and that petitioner subsequently identified two additional accounts and that were owned by NPGMP, but denies the remainder of the allegations for lack of sufficient knowledge or information.

g. Denies.

h. Denies for lack of sufficient knowledge or information.

i. Denies.

i. Denies for lack of sufficient knowledge or information.

ii. Denies.

iii. Denies.

iv. Denies.

(A) Denies for lack of sufficient knowledge or information.

(B) Admits that respondent treated the Decedent's personal property as being owned directly by the Decedent, but denied respondent erred as alleged. Further denies the remaining of the allegations for lack of sufficient knowledge or information.

j. Admits that respondent adjusted the Decedent's taxable gifts and that respondent made a whipsaw adjustment that included the amount of the receivable in the value of NPGR, but denies respondent erred as alleged. Further denies the remainder of the allegations for lack of sufficient knowledge or information.

k. including i and ii. Admits that petitioner may be entitled to deductions for additional allowable expenses under I.R.C. § 2053 (to the extent not disallowed pursuant to § 2053(c)(1)(D)) and for additional state death taxes under § 2058, but denies that petitioner has substantiated any allowable deductions beyond those that have been allowed by respondent in the notice of deficiency.

l. Admits respondent's determination, but denies respondent erred as alleged.

i. Denies for lack of sufficient knowledge or information.

ii. Denies for lack of sufficient knowledge or information.

iii. Denies.

iv. Denies.

8. Denies generally each and every allegation of the petition not herein specifically admitted, qualified or denied.

WHEREFORE, it is prayed that the relief sought in the petition be denied and that respondent's determination, as set forth in the notice of deficiency, be in all respects approved.

MICHAEL J. DESMOND
Chief Counsel
Internal Revenue Service

Date: November 19, 2020

By: RANDALL L. EAGER
Special Trial Attorney
(Small Business/Self-Employed)
Tax Court Bar No. ER0256
2345 Grand Blvd., Suite 301
Kansas City, MO 64108
randall.l.eager@irscounsel.treas.gov
Telephone: (816) 823-0909

BLAINE C. HOLIDAY
Senior Counsel
(Small Business/Self-Employed)
Tax Court Bar No. HB0257
Wells Fargo Place, Suite 1130
30 E. 7th Street, MS2000STP
St. Paul, MN 55101
blaine.c.holiday@irscounsel.treas.gov
Telephone: (651) 361-1808

OF COUNSEL:

JOSEPH W. SPIRES
Division Counsel
(Small Business/Self-Employed)

VICKI L. MILLER
Area Counsel
(Small Business/Self-Employed: Area 9)

DOUGLAS S. POLSKY
Associate Area Counsel
(Small Business/Self-Employed)

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